Euro weakens as unemployment rises to record high

The euro fell versus the majority of its 16 most-traded peers as a report showed unemployment in the 17-nation currency bloc climbed to a record in February, adding to concern the economy will struggle to emerge from recession.

The single currency declined against the dollar as a purchasing-manager index of manufacturing stayed below the level that shows contraction. Sweden’s krona gained for a second day versus the dollar after a factory index rose. Australia’s dollar advanced after the Reserve Bank said existing stimulus was working. The European Central Bank meets on April 4.

“The PMI data was universally soft, and that’s pushed the euro lower,” Jack Spitz, Toronto-based managing director of foreign exchange at National Bank of Canada, said in a telephone interview. “There’s still downside risk with respect to structural issues and ahead of the ECB, which is expected to guide more dovishly given the economic misses.”

The euro weakened 0.2% to $1.2823 at 10:38 a.m. in New York. The 17-nation currency was little changed at 119.84 yen after falling earlier to 119.15, the weakest level since Feb 26. Japan’s currency fell 0.3% to 93.46 per dollar.

Unemployment in the euro area rose to 12% and the January figure was revised up to the same level from 11.9% estimated earlier, the European Union’s statistics office said. That’s the highest since the data series started in 1995. A gauge of manufacturing in the region slid to 46.8 last month from 47.9 in February, Markit Economics said. A reading below 50 indicates contraction.

‘Recessionary Territory’

“Euro-area PMIs are stuck in recessionary territory,” said Lee Hardman, a currency strategist at Bank of Tokyo- Mitsubishi UFJ Ltd. in London. “The ECB will acknowledge this week that the pace of economic recovery remains disappointingly weak, which will dampen upside potential for the euro.”

The krona gained all of its major peers except the New Zealand dollar as Stockholm-based Swedbank ABA said a PMI for the country advanced to 52.1 in March from 50.9 the previous month. A reading higher than 50 indicates growth.

The krona appreciated 0.5% to 6.4828 per dollar after rising 0.2% yesterday. The currency strengthened 0.7% to 8.3124 per euro.